Airborn Wired & Wireless was recently moved out of the MTN South Africa stable in order to free the unit from the MTN network. Having started life in October 1999 as the mobile e-business division of MTN, the company is in transition to becoming a wholly owned subsidiary of M-Cell, the MTN parent company.
But new CEO Ross Macdonald has not veered from the unusual course which saw the unit conjure up one of the biggest and fastest growing Web sites in Africa out of little more than thin air.
In fact, Macdonald is set on getting unique technologies installed by competitive networks while destroying the corporate crown jewels, MTNSMS.com. But then, the site was never more than proof of concept.
Selling to the competition
Macdonald says competitive network operators such as Vodacom are potential clients for the unit`s remote interactive voice response (RIVR) and SMS systems, which necessitated the corporate juggling to move Airborn out of MTN.
"Airborn is a mobile solutions company. It is divorcing itself from a network. It is going to be a provider of services to all networks," he explains.
RIVR, which delivers data via SMS after the system is triggered by a very short voice call, will be one of those services. Airborn recently announced a deal with systems integrator Unisys.
"Unisys went away with the [RIVR] software and some of our engineers and developed it to a level of integrity where it is shrink-wrapped and ready for market," Macdonald says. "Now they can sell it to their base of clients."
We view MTNSMS as proof of concept. This is something we wanted to use to show that we could build a community.
Ross Macdonald, CEO, Airborn
Unisys is to handle channel management, product development and support, with Airborn maintaining the system back-end and pocketing a third of the revenues.
The other Airborn asset that is being turned into a revenue generator is MTNSMS.com, the Web site which recorded close to 89 million page impressions per month for the last quarter of 2000 and is growing fast. Using viral marketing and nothing else, the site had attracted 4 800 997 registered users at last count, who use its interface to send free SMS messages to virtually any GSM phone worldwide.
Yet earlier this year Airborn announced a deal with America Online`s (AOL) ICQ messaging service to supply it with a similar service, complete with the phone-to-web return path thought to be unique to MTNSMS. ICQ will share advertising revenue with Airborn.
"We recognise that MTNSMS is a competitor to our client [ICQ]," says Macdonald. "We are trying to find a way of using it that is mutually agreeable." He does not see the reverse - ICQ competing with MTNSMS - as a problem.
"We are cannibalising ourselves," he says. "We are bringing in new technologies and services of our own that will compete with both MTNSMS and ICQ, because our role is to continually re-invent ourselves. In six months we will have a whole bunch of new services that will make what we have now obsolete."
Such an approach, he says, is all that can keep the competition at bay.
One of these "cannibal" projects is a thin desktop application to send and receive SMS text over the Internet, negating the need for the Web site, except for those requiring message mobility.
Macdonald says the site was never meant to become a viable business. "We view MTNSMS as proof of concept. This is something we wanted to use to show that we could build a community. It has been successful, because we would not have landed the AOL deal without it."
The case for data
Airborn believes mobile operators will be interested in both products, as they provide an opportunity for networks to encourage the use of data transmission at a cost far lower than similar options.
Recent projections of cellular revenues have spooked both industry and investors by indicating that high-flying operators may soon run short of cash; victims of their own success. Analysis has shown that the growth of prepaid cellular use, pioneered in SA, is driving down the average revenue per user (ARPU) for providers. ARPU is a key measure of performance in the sector, where overheads and capital costs are relatively stable.
If we have a critical mass of telcos using it, and if we can get RIVR to be a standard in the way that Microsoft Office is a standard, annuity revenue from it becomes far more realistic.
Ross Macdonald, CEO, Airborn
Despite being charged higher fees, prepaid users bring in significantly less money than their contract-bound counterparts, while competition generally drives down the prices networks can charge. Network operators are turning to data traffic as a saviour from ever-lower prices and the resultant lower profit margins.
But Airborn scorns Wireless Application Protocol (WAP) as a toy devised by technologists that cannot be used by consumers, and Macdonald has doubts about the much-touted general packet-switched radio system (GPRS) technology.
"You have a handset issue, without standards or any penetration," he says. "But the biggest issue [operators] have is just billing for packets. That is why we are not holding our breath. We know it will probably take 18 months longer to deliver [on GPRS] than they originally expected."
In the meanwhile, Airborn offers what it says is two compelling products which are cheap to install and easy to operate. RIVR requires a short call, which barely makes use of network infrastructure but can still be billed as one unit, usually one minute. The SMS service, on the other hand, sees responses from cellphone to Internet, another instance of billable traffic the operator would not otherwise have generated. Although normal interconnect agreements do not apply to SMS, Airborn believes it could participate in the revenues generated in this way.
The future? More of the same
Macdonald says the company of 25 people will probably never grow beyond a staff complement of 50, but has big plans.
"In the next six months we are looking to get about 30 networks using RIVR. If we have a critical mass of telcos using it, and if we can get RIVR to be a standard in the way that Microsoft Office is a standard, annuity revenue from it becomes far more realistic."
For now, Airborn will stick to SMS applications, as SMS traffic is only projected to peak in 2005 at a $10 billion business. Macdonald says even the introduction of third generation high-bandwidth networks will not kill SMS in regions such as Asia Pacific, where incomes should make users more open to low-cost alternatives.
Unstructured Supplementary Services Data (USSD), SMS`s big brother, is also being watched for possibilities. USSD uses the built-in GSM signalling path for messages much as SMS does, but handles 182 characters rather than the 160 SMS can, and responses via USSD can be up to seven times faster than over SMS. Yet it is available on existing phones.
"We believe there is going to be a big opportunity there," Macdonald says.
Other areas the unit is working on includes a product on the e-mail front and a payment gateway which will not only allow financial transactions over the mobile phone, but will allow Airborn to charge those companies using it a percentage of their revenue. "Hopefully, we will do a deal with a big financial services company, partner with them and participate in ongoing opportunities."
As for the corporate structure, Macdonald says spinning the company off and listing it could be done to unlock M-Cell shareholder value, but it would not be necessary in order to raise capital.
"The funding requirements for something like this are very low. It is not like we need a huge investment in infrastructure and people or anything."
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